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In recent years, there have been a surprisingly increasing number of small businesses in over the world, which also create a numerous young millionaire. This in turn attracts and inspires nearly one million MBA applicants every year (Statistic Brain, 2013). However, the path to outstanding success is always arduous and demanding, in fact, a half of starup businesses fail after year 4 (Statistic Brain, 2014), and only a quarter of employers have sufficient ability to lead their company in more than 15 years (Nazar, 2013). While there is a mere possibility of failure involving disasters or fraud, the primary causes emanate from the leaders’ proficiency Sometimes the manager of the small business does not have the capacity to operate it successfully. The owner lacks the leadership ability and knowledge necessary to make the business work
University of Chester Module Title : BU7201 - Management Skills and Entrepreneurship Student number : 1326927 1 Table of Contents List of Figures 2 Part A: Essay Introduction In recent years, there have been a surprisingly increasing number of small businesses in over the world, which also create a numerous young millionaire This in turn attracts and inspires nearly one million MBA applicants every year (Statistic Brain, 2013) However, the path to outstanding success is always arduous and demanding, in fact, a half of star-up businesses fail after year (Statistic Brain, 2014), and only a quarter of employers have sufficient ability to lead their company in more than 15 years (Nazar, 2013) While there is a mere possibility of failure involving disasters or fraud, the primary causes emanate from the leaders’ proficiency “Sometimes the manager of the small business does not have the capacity to operate it successfully The owner lacks the leadership ability and knowledge necessary to make the business work” (Scarborough & Zimmerer, 2006, p 27) It is obvious that the long-term survival of a small company depending crucially on how a manager or an owner manages and controls it Yet, a company can reach a well-organized model like a normal manager’s desire, or a stable income as a primary objective of an owner, or an impressive growth as entrepreneurs’ intention Noticeably, if a person was born to be a successful entrepreneur, he could be good at the other position This questions what skills, character traits and managerial expertise are required to form a successful entrepreneur In order to seek the answer, the definition of small business, the reasons for the failure will be discussed This in turn is to understand the importance of leadership skill and knowledge to an entrepreneur, and then, the meaning of Scarborough & Zimmerer’s statement will be clarified However, it should be noted that in the context of this discussion, the 3 owner will be regarded as an owner-manager because of the fact that a majority of owners are responsible for the day-to-day management of small companies Small business model The reasons why the management ability’s owner-managers take the considerable importance role in a small company are its size of business model and its own characteristics There are many different definitions of small business in term of quantitative measure, applying in different economies For example, according to the European commission (Commission recommendation of May 2003, 2003, pp 36-41), a small enterprise has from nine to fifty employees with a financial celling of ten million Euros turnover Qualitatively, because of the small scale, it normally operates independently in a niche market, leading to the difficulty for the owner-manager in risk diversification (Stokes, 2002) This makes it less attractive to investors Limited customer base, limited financial and human resources, and personalized management all contribute the dominant influence of owner-managers of their firm Nonetheless, if a business fails, whether or not they should bear full responsibility because the weakness in their leadership skill and knowledge Failure in small business Failure in business comes from many reasons and from different perspective, failure is viewed in different ways However, no matter what failure is, the reasons have not changed According to Bridge, O’Neill, & Martin (2009) there are ingredients constitute failure as can be seen in the Figure Any Figure 1: The ingredients of failure firm maybe faced with these challenges, but small enterprises are more vulnerable than others due to their own Entrepreneurial character External environment characteristics mentioned above (Ibid) As Luck the dominance of the entrepreneur in the small firm, the lack of skills in management Business decisions and administration as well as the bad Company weakness decisions still can cause a weak, unstable structure of the company despite of having a Source: Bridge, S., O’Neill, K., & Martn, F.(2009). 4 strong management team Moreover, the limitation of its resource cause struggle against everchanging marketplace Burns (2001) argues that these four factors have a relationship with each other that is illustrated in the Figure The failure likely originates from the weak entrepreneurship combined to the disproportionate influence of the entrepreneur Figure 2: The integrations between ingredients Entrepreneurial character Decline Bad decisions Company weaknesses Unexpected change in environment FAILURE More specifically, Zimmerer, Scarborough, & Wilson (2008) listed ten reasons for business failure (Figure 3) All of them also are more or less relevant to the entrepreneurs’ ability and trait Even in the case that the small enterprise growth fast, it still is a potential risk factor that will come out when beyond entrepreneurs’ capability A good example of this is Robert Schell, who owned Avico, providing e-consulting service Quickly, his company was one of the most fastestgrowing company and the decline was also at a rapid rate later (Daniel, 2004) Failure was defined when he could not control the company’s managerial activity Faster growth a company Inability to make the “entrepreneurial transiton” Management mistake gain, greater challenges it faces Know your business in depth Lack of experience Poor financial control Improper inventory control Prepare a business plan Figure 3: Failure and Suggestion Incorrect pricing FAILURE Suggestions Failure to develop a strategic plan Uncontrolled growth Understand financial statement Learn to manage people effectvely Weak marketng efforts Poor locaton Manage financial resource 5 Set your business a part from a compettor Maintain a positve attitude Source: based on Zimmerer, Scarborough, & Wilson,D (2008), and Scarborough (2012) From the causes of failure in business, Scarborough (2012) highlights some solutions that help entrepreneur survive The reasons are found down, the proposition is given as well, but long-term survival realistically still a formidable task for most owner-managers This raises a question of whether it is because they knows what to do, but cannot afford to As they lack of the skills and understanding in term of their business Leadership “Leadership is the process of influencing others to understand and agree about what needs to be done and how it can be done effectively, and the process of facilitating individual and collective efforts to accomplish the shared objectives (Yukl, 2002, chapter 1, p 7)” Obviously, leadership skill is a fundamental need for leaders generally and managers and owner-managers particularly Although there is an argument that sometime management and leadership not go together, the term “manager” describes a job position with a number of people, then leading people must be a principal ingredient of managerial capabilities (Gillen, 2002) When the enterprise develop to a certain size, the owner–manager cannot manage and control it single-handedly, hence, an entrepreneurial management team is essential for growth orientation (Stokes, 2002) This in turn further confirms the role of leadership contributing an ambitious owner-manager, who not only needs to connect all the staff, but also his team of managers to create a synergy power However, sometimes owner-managers have leadership skill, but in term of transactional style, then the development of small business cannot go further Transactional leadership is close to 6 management, regarding the smooth day-to-day operations of business In contrast, transformational leadership function the owner better because it is “empowering and inspirational, resulting in changes in people’s abilities, attitude, value, beliefs and motivation (Gill, 2011, p 87).” Thus, even managers and owners have their own leadership skill, this should be varied depending on concrete situations Yet, if they really lacks of this skill, what will happen to the business As Llopis (2012) shares his experience in his career, because he did not concern about leadership development, believing in the Glenn Llopis Forbes contributor Source: Forces (2012) inherited management system Consequently, he lost a moneymaking business relationship Luckily, he realized the mistake, building and leading his team Eventually, he was successful with the new business relationship However, failure does not happen frequently because the weak leadership ability In practice many managers or owners, who lack of this skill are managing and operating their company normally According to a research of nearly 400 leaders in the United Kingdom in 2011, only 36 percent were rated as having effective leadership in their firms (Cipd, 2011) Knowledge Generally, knowledge that a person gain through learning or experience is the key for any kind of success Knowledge is the first foundation level of a successful manager Basic facts and relevant professional knowledge facilitates leaders and manager to make good judgments (Pedler, Burgoyne, & Boydell (2006) For example, managers with marketing myopia can force company fail to satisfy the customers’ demand and adapt to the change of the marketplace Owner-manager that is in the inadequacy of finance can perform disappointingly in cash-flow management This will push the small firm in danger of a real failure due to the fact that financial control affects directly to the survival of any company, especially small ones (Cadden & Lueder, 2013) Knowledge is fundamental for owners to facilitate the business activities Differing from the chief executive of a big company, the owner-manager of a small one is both of the planer and 7 implementator, for daily tasks as well as long term plans Hence, they are required to have general knowledge of many fields such as customer knowledge, and product research and development In the several general methods for entrepreneurs to avoid failure as mentioned in Figure 3, almost all of them in regard to knowledge to make these suggestions practically Hernaeus (2003) emphasize in the trend of globalization with the high-speed development of technology, knowledge is demanding more than ever New ideas are not insufficient but too few owner that are qualified to develop these ideas One thing is associated with However, it should be noted that in the reality life, many successful entrepreneurs start their business with a very basic knowledge as normal people have Richard Branson, the CEO group is an example He clearly did not have sufficient knowledge at the time he started his business because of the dyslexia and very poor result in school However, after the first venture with the Student magazine and then a mail order record company, his business was expanded Now, he is one of the richest business man (Sir Richard Charles Nicholas Branson, (2014) Repeatedly, Richard Branson is just one of many successful entrepreneurs without a college degree (Hudson, 2013) Yet, they have the vision and ideas and motivation and they learn every day from the firsthand experience As the discussion above, knowledge and leadership are Richard Branson Founder of Virgin Group meaningful for the long-term business development, Educaton: , Source: Sir Richard Charles Nicholas Branson (2014)both are fundamental, affecting the business survival However, one important source of the disaster for business is the negative effects of entrepreneur character Thus, in order to reduce the risk in business and to be successful, an individual need to fulfill his or her entrepreneurship, which required both of knowledge and leadership 8 The model entrepreneur The Figure is an overview of skills and characteristics that an entrepreneur need to reach the success Stokes (2010) has been questioned about the importance of personal attributes to the success of entrepreneur He argued that technical skills and management competencies like a necessary condition for success while the two others are the sufficient condition Consequently, entrepreneurial behaviours and characteristics decides who win the fierce competitive market Schaper & Volery (2007) indicated that the basic requirement of an entrepreneur is motivation Then, by using his skills and knowledge, new venture opportunities will be identified, and their potential and their risks will be estimated (Knowledge@wharton, 2009) Figure 4: The building block of successful entrepreneurship Entrepreneurial management behaviours * Opportunity identficaton * Resource leveraging * Networking * Effectual decision making * Creatvity and innovaton Technical skill * Product/service knowledge * Market/ industry understanding Personal attributes * Innovatve * Determined * External focus * Team Leader Management competencies * Marketng * Finance * Human relaton Source: Stokes, & Wilson (2010) 9 There also are different approaches to entrepreneurship Burn described a set of the same four character traits of both owners and manager, and seven additional traits of entrepreneurs He concludes that entrepreneur are born with these certain traits, which also are impacted by the surrounding environment Nonetheless, as defined by Scarborough (2012), entrepreneurship is not an inborn attribute and can be learned However, what matter the answer is right or wrong, an individual can teach himself from failure, acquire as much as knowledge, master leadership skill, in order to approach success Conclusion In conclusion, as Scarborough & Zimmerer said in their book, leadership and knowledge are much important to an owner-manager, helping them avoid management mistake as well as the decline of the failure There is not a perfect recipe for success as well as a perfect solution to avoid failure, but success or failure is the combination of various things Amongst those, what distinguish between a winner and a loser in the marketplace is the personal characteristics, which is relatively natural Hence, although leadership ability and knowledge is the answer to the failure immediately flashed in most people’s mind, it is not always true, it happens sometimes as the opinion of Scarborough & Zimmerer Even though, in the way to be a successful entrepreneur, individuals must not stop practicing, learn and motivate themselves In fact, the number of people, who are in managerial and professional incompetence at the beginning, but become successful, just constitute a mere proportion of the world of business Furthermore, failure is not really an enemy, it can be considers a friend entrepreneurs meet on the path to success This friend helps them more understand themselves, their strength and weakness, force them attempt to better Because of this, in the perspective of real entrepreneurs, their knowledge and abilities are used more to obtain successes than to avoid failure References Statistic Brain (2013) Master of Business Administration Statistics (MBA) Retrieved June 9, 2014, from http://www.statisticbrain.com/master-of-business-administration-stats-mba/ Statistic Brain (2014.).Startup Business Failure Rate By Industry Retrieved May 22, 2014, from http://www.statisticbrain.com/startup-failure-by-industry/ 10 10 The procedure for a new drug registration will last at least month, so the Sunshine will officially launching Vidatox® 30CH at the beginning of 2015 (Year 1) Because primary goal of the retailing business is to promote Vidatox to potential customer, it will made of a relatively small of total revenue The main sales is generated from providing product to hospitals and clinics, which is estimated based on the number of people getting cancer Because Vidatox® 30CH can be used for many type of cancer, assuming that each new cancer patient will buy Vidatox® 30CH one time in their life from hospitals In the first year, year 2015, it is estimated that the company will provide 8400 items for percent of new cancer patients though treatment channel The price will be the expected average price (£1350/12 items) Table shows the relatively worst scheme of business plan Because Sunshine is the exclusive distributor of Vidatox® 30CH in at least years, and the demand for cancer drug increase enormously every year Table 4: Sales projection Year 1-5 Year Number of product sold Gross Sales Year Year Year Year 8,400 9,000 12,000 14,000 17,000 945,000 1,012,500 1,350,000 1,575,000 1,912,500 Marketing Plan Sunshine will focus on brand development from the first activities and operations In every equipment or item in the office as well as clothes for staff, company’s logo will be design on Website and telecom system mainly serve the consulting service and retailing business This is not expected to make profit In other hand, it is to strengthen the reputation and is the foundation for Sunshine develop to a cancer information system in the future Because Vietnam have strict regulation about medicine advertising, the company will limit advertising on mass media channel The company focus on a promotional mix strategy (Belch & Belch, 2004) with some element as follows: 20 20 Figure 8: Promotional mix strategy for The Sunshine Sale Promotion Direct marketing – oriented promoton is target to mail hospitals, clinics.will Sa Advertsing target to doctor and pharmacist, encourage them useTrade Vidatox in their sales business operatons, direct and phone Public relation Personal selling The cancer conference will be hold ever year with partcipant as doctors and pharmacists The company will actvely partcipate in volunt Sales representatve conductng hospital visits with free samples, p Human resources Strategy The Sunshine require all staff have good organizational and time management, team-work skills, customer service skills, strong communication The Sunshine will employ require manpower needed as follows: Table Manpower plan Position Number of personnel required Manpower needed (addition requirements) 21 21 Pharmacist One Leadership skill, year experiences, English speaking Pharmaceutical technician One at year 1, and Leadership skill, year experiences, English two from year speaking Pharmaceutical sale representative Four at year 1, and Work well independently, at least years at year experiences, excellent understanding of pharmacology, Motivation for Sales, negotiation, presentation skills English speaking Accountant One at year 1, and year experiences, Documentation Skills, Multitwo from year tasking Computer technician One Phone representative One at year 1, and Product knowledge, Customer Service, Problem two from year Solving, Documentation Skills, Listening, Phone Skills, Resolving Conflict, Analyzing Information , Multi-tasking Driver One at year 1, and Driving licence two from year Creativity, Multi-tasking, Every months, all staff have to undergo intensive training about product and market knowledge as well as soft skills Part time job can be offered if necessary, however, just for documental and delivery tasks In order to run some short-term project such as product launch seminars or conferences, the Sunshine can hire some external organizations Pharmaceutical sale representative can be given reward according the sales that they made When the company made profit, % will be allocated to Welfare Fund The company will organised annual tours for staff even if not achieving the sale objectives Business operation All departments will work from 8am – 5pm, except customer care department, finishing their job at pm The timetable can be flexible for Pharmaceutical sale representatives Under the Vietnamese business law, the Sunshine will have a Members' Council including two member Mai Nguyen will be chairman of the Members' Council and director Phuong Bui will 22 22 be the deputy Director and pharmaceutical manager, being primarily responsible for training staff Basically, the company have three main department However, each employee may be given different tasks spontaneously Sales department will be divided into teams for special tasks Figure 9: Organisational Chart Chairman / Director Deputy Director Marketng/ Customer service Sales Department Accountng / Finance Financial plan 8.1 Break even analysis According to calculation in Appendix 5, the break even analysis indicates that the Sunshine need to achieve at least £446,738 in order to get profit Figure 10: Break even Analysis 23 23 8.2 Projected profit and loss When the business run well, the salary for staff as well as reward will be improved The marketing cost in the Year particularly high, but it will decrease gradually when the company obtain a certain position in the market Table 6: Profit and Loss Calculation Year Number sold of product 8,400 Year Year 12,000 13,000 15,000 1,350,000 1,575,000 1,912,500 1,071,480 1,250,060 1,517,930 278,520 324,940 394,570 75,000 78,600 83,400 42,600 20,000 15,000 15,000 15,000 15,000 3,400 3,360 6,000 9,600 2,000 3,400 3,700 6,000 10,400 2,000 3,400 4,000 6,000 12,000 2,000 3,400 4,000 6,000 13,000 2,000 3,400 4,000 6,000 14,000 2,000 86,960 96,660 117,400 122,000 127,800 108,004 27,001 112,230 28,058 84,17 161,120 40,280 202,940 50,735 266,770 66,693 120,840 152,205 200,078 945,000 Direct cost of sales 750,036 Gross margin 194,964 Net profit 9,000 Year 1,012,50 803,610 208,89 56,160 Gross Sales Payroll Sales and Marketing and Other Expenses Depreciation Utilities Insurance Rent Other Total Operating Expenses Profit before tax Tax payable (25%) Year 81,003 Conclusion A small business enter the pharmaceutical market will normally face a substantially economic and regulatory pressures However, the plan demonstrates that the company will create profit from the Year and continue in the upward trend If the company can achieve expected profit margins in accordance with the plan, further service providing reliable cancer information will be offer 10 Reference 24 24 Belch, G E., & Belch, M A (2004) Advertising and promotion: an integrated marketing communications perspective (6th ed.) Boston: McGraw-Hill Google Maps (2014) [National Hanoi Cancer Hospital, Hanoi, Vietnam][Street map] Retrieved June 20, 2014, from https://www.google.com/maps/search/hanoi+cancer+national+hopital/@21.0020249,105.822715 8,13z International Agency for Research on Cancer (2014) Globocan 2012 estimated cancer incidence, mortality and prevalence worldwide in 2012 Online Analysis [database] Available from: International Agency for Research on Cancer website: http://globocan.iarc.fr Labiofam (n.d) Vidatox 30CH Retrieved from http://www.labiofam.cu/en/productos/vidatox30ch.html Savipharm (2010) VN Pharmaceutical 2011-2020 Retrieved June 20, 2014, from http://savipharm.com.vn/en/chu-de-y-duoc/79-vietnamese-pharmaceutical-industry-issues-forthe-decade-2011-2020.html Taylor, L (2014, April 22) Vietnam pharma market “to grow 20% to 2017” Pharmatimes online Retrieved June 20, 2014, from http://www.pharmatimes.com/article/14-04- 22/Vietnam_pharma_market_to_grow_20_to_2017.aspx Ukforex (2014) Money average rate Ukforex Retrieved from http://www.ukforex.co.uk/forextools/historical-rate-tools/monthly-average-rates Vidatox Plus (n.d) Vidatox [image] Retrieved June, 20, 2014, from http://vidatox.vn/vidatoxplus_2.htm Vidatoxonline (2014) About Vidatox Retrieved from http://vidatoxonline.com/index.php? option=com_content&view=article&id=43&Itemid=27 VP Bank Securities (2014, April) Vietnam pharmaceutical industry Retrieved June 21, 2014, from https://www.vpbs.com.vn/Handlers/DownloadReport.ashx?ReportID=2094 11 Appendices 25 25 Appendix 1: Number of new cancer and deaths in South-Eastern Asian countries in 2012 Source: International Agency for Research on Cancer (2014) Appendix 2: Start up requirement Start-up expense Items Legal Rent Refurbishment Office equipment Cost (£) 1,000 3,400 1,400 2,800 26 26 Start-up assets Items Cost (£) Long-term assets 17,000 Star-up stock 146,400 Working capital 50,000 Other current assets Utilities Furnishings Insurance Marketing material Others Total start-up expenses Total requirements 280 1,400 500 6,000 1,000 17,780 231,180 Total assets 213,400 Appendix 3: Fee paid for the company representative As an exclusive distributer of a foreign manufacture, the Sunshine have to pay an extra fee for imported items to the company representative, AMV Group - CIF price for each package of 12 bottles: 915 GBP CIF price for one bottle: 76.25 GBP Fee paid for company representative as follows: Quantity Between over 5000 and 7500 Between over 7500 and 10000 15% 14% 13% 12% 11.44 10.68 9.91 9.15 up to 5000 Fee rate for each product Fee (£) Example: Over 10000 If total quantity of products sold in one year is 10500, the fee will be: = 9.15x500 + 9.91x2500 + 10.68x2500 + 11.44x5000 = £ 113,250 Appendix 4: Calculation of cost of goods sold In Vietnam, in order to import directly, a company have to have an import-export license, and the license for drug importing activity have to undergo a very complicated procedure with high requirement for technical facilities Therefore, the Sunshine will use the import-export service form an import consignor with a free from 1% to 2% on value of good (include all taxes) - Import tax rate: 0% VAT: 5% If delivery fee is 0, fee paid for import consignor each bottle with the rate of 2% is: = (76.25 + 76.25x5%) x 2% = £1.6 27 27 If the fee rate is 1%, Sunshine have to pay: (76.25 + 76.25x5%) x 1% = £0.8 The cost for one imported item will be from £86.2 to £89.29 Appendix 5: Break – even Analysis Yearly revenue break - even is: £446,738 Assumption: - Variable costs per unit are £89.29 cost of goods sold, £1 sales and marketing cost, £ 1.5 labour cost, and £ utilities and other cost, for a total of £ 92.79 - Estimated Yearly Fixed Cost: Assuming that Yearly Fixed Cost equals the annual average amount of the sums of depreciation, 50% utilities, rent, 50% sales and marketing and 80% payroll cost The amount will be £78,828 - When the selling price is £ 112.5, then: £78,828 : (£ 112.5 - £ 92.79) = 3,971 units If the Sunshine sell more than 3971 units per year, at the price of £ 112.5, the business will reach £446,738 in revenue, start to make a profit Appendix 7: Business Plan Presentation Good morning / afternoon every one, I would like to introduced myself My name is Mai Nguyen, I am currently an international post student in University of Chester I came here with a very interesting business plan, opening a company in my country, Vietnam Before going to the main part of this presentation I would like to ask you a question? Have you ever concern about the fight against cancer in over the world? The risk of getting cancer globally is 19% Human being are facing a substantial increase in the rate of people died due to cancer Vietnam now is the third biggest cancer patients in South-Eastern Asia So my company, The Sunshine are going to open providing a new drug in Vietnam and our wish is to contribute a small role in the fight against cancer in Vietnam I would like to divide my talk into parts, firstly, I’d like to introduce about my new company, then I will move to the business opportunities, the next important part will be about marketing strategy I will talk a little bit about the way the company recruit staff and operate business 28 28 Finally, the last part, financial plan will show the profitability of plan there will be plenty of time at the end of my speed for questions and discussion Now let me start with our objectives in business… Slide Slide 29 29 Slide Slide 30 30 Slide Slide 31 31 Slide Slide 32 32 Slide 33 33 Slide 10 You’ve heard about my plan for the Sunshine Company Pharmaceutical industry always face a substantially economic and regulatory pressures and the Sunshine is not an exception However, as I have presented about the opportunity as well as a realistic financial plan The Sunshine is really a feasible project I am preparing all things carefully so that I can this plan as soon as possible Thank you very much for your attention, and if there are any question, please feel free to ask 34 34 ... and can be learned However, what matter the answer is right or wrong, an individual can teach himself from failure, acquire as much as knowledge, master leadership skill, in order to approach... way to be a successful entrepreneur, individuals must not stop practicing, learn and motivate themselves In fact, the number of people, who are in managerial and professional incompetence at the... considers a friend entrepreneurs meet on the path to success This friend helps them more understand themselves, their strength and weakness, force them attempt to better Because of this, in the perspective